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Cincinnati Streetcar: City Council Bows to “Too Big to Fail” Instead of Following “Luck Factor #4”

WLW (AM 700) radio announced at 2:00 PM that newly elected mayor John Cranley said that the streetcar project will go forward and, despite his opposition to the project, he will respect the vote of council. This comes as a result of a third councilman, Kevin Flynn, changing his mind since the campaign trail. His vote gives proponents of the project a 6-3 veto-proof advantage.

Background

For those unfamiliar with the Queen City, the streetcar issue has evoked more passion than almost anything else in recent memory. The previous city council thought up and promoted this fairy tale project amidst a plethora of concern from realistic cost overruns and operating loss projections. Not only that, but as mentioned by WLW talk show host Bill Cunningham today, the route is not one which will be used by work commuters but is limited to recreational travel (and not tracking a sensible path either).

But, Council won by getting the public to reject a 2011 ballot item which would have prevented this and the possibility of any related projects through 2020!1 Fear of hamstringing the city for nine years may have been the tipping point in the 51.5% decision.

Project’s Beginnings, New Council and New Money

Lo and behold! Projected cost overruns and other problems began to appear as opponents of the project had predicted. Enter a new city council, and the first one to be elected for four-year terms instead of two-year terms. Several new members were elected, many on the promise to stop the project and its fiscal bleeding. Then, proponents scrambled to keep the streetcar project from being halted. They succeeded in obtaining the promise of private support to cover operational losses and thus, prevent adding to the city’s expanding and perennial budget headaches.

Today’s Result: “Too Big to Fail” Wins

The build-up for today’s vote revolved around choosing an immediate loss or a long-term loss. Proponents won on the basis that stopping the project would throw away the $30 million already spent and penalties which could up the total loss to $80 million. In addition, they claimed it would damage the city’s reputation and cause it to fall out of favor with the federal government.

City’s reputation? With cities like Detroit, Stockton, CA and San Bernardino, CA having gone bankrupt and others with horrendous other problems, we’re worried about our reputation? Cincinnati’s vanity might suffer initially, but in the long run, the wisdom of a change-of-heart would have been respected.

Lose favor with the federal government? Come on, be serious. Why would anyone be reluctant to offend a government whose recent trademarks have been lying, mounting fiscal irresponsibility and penalizing those who live by their consciences? Have a nice day, NSA and IRS.

Financial losses? Yes, there would be a significant short-term hit. It would be a combination of no return for an investment, financial penalties and loss of jobs related to the project. This cannot be trivialized. HOWEVER, it must not be a reason to invoke the “too big to fail” philosophy which has caused our federal government to spend billions foolishly on bail-outs just to garner votes.

OK, so private backing will underwrite the projected annual loss of $1.5 to $2+ million. First question, what business starts a project with the understanding that it will lose money continuously? Oh, but we don’t run cities like we do businesses. But if we did, we would avoid many of these crises!

Finally, how reliable is that projected loss? If it’s like all of the other estimates calculated by those who want it to continue at all costs (pun intended), these losses will prove to be underestimated. Even if that does not happen, what is the guarantee that the underwriters will continue indefinitely? Suppose they face financial hardships or even bankruptcy? I forgot, the city can raise property taxes – which is why the local real estate board has been against this trolley folly.

What is “Luck Factor #4” and Why is it Important?

Luck Factor #4 was part of an article written by Max Gunther who studied why some people were unusually lucky while others always seemed to be bitten by bad luck.2 He found five reasons which separated the lucky from the unlucky. The fourth was called “The Ratchet Effect.” About it, he wrote:

“A ratchet is a device that preserves gains. It allows a wheel to turn forward but prevents it from slipping backward.”

“Lucky people seem to organize their lives in an analogous way. They know that almost any venture can lead to either loss or gain. At the outset it is impossible to know which way the wheel will turn. But if it starts to turn the wrong way, the lucky are prepared to stop it. They have the capacity to get out of deteriorating situations quickly. They know how to discard bad luck before it becomes worse luck.”

He went on to say that people refrain from baling out when they should because “It’s too hard to say ‘I was wrong’” and their investment in a project “is a cherished thing” and abandoning it “hurts at least as much as admitting you were wrong.”

Cincinnati City Council has Chosen to be Unlucky

There you have it: 1) “too big to fail” 2) “it’s hard to admit to the outside world that we were wrong” and the ever-present 3) “now our terms are for four years instead of two, they’ll forget”

Sorry, but four years of money continuously going down the drain will keep us from forgetting!… (By the way, since federal money is involved, this losing project could be called “Obamafare.”)

1 – “This proposed Ballot Issue would amend the Charter of the City of Cincinnati by adding a new Article XVI… The new Charter article would prohibit the City from the spending or appropriation of any money or any indebtedness or contractual obligations for purposes of financing the design, engineering, construction or operation of any portion of a Streetcar System through December 31, 2020.” From www.smartvoter.org on 11/8/2011